EU urges Spain to reveal refinance plan for troubled Bankia | WPN World People News

The European Union has urged Spain to spell out quickly how it plans to finance the recapitalization of troubled lender Bankia SA, which it took over in May, and if there are other banks which have been hit by debilitating real estate assets.

European Commission spokesman Amadeu Altafaj told Spanish National Radio that the conservative government in Madrid needs to act fast as the uncertainty has contributed to the recent market turmoil.

The Spanish government last week announced plans to inject a further $19 billion into Bankia, the country's fourth largest lender which has been hit by bad loans to the collapsed property sector.

An independent audit of Spain's banks, reportedly weighed down by more than 100 billion euros of bad loans, is to give its report next month. The audit is expected to propose that Spain's other lenders need major capital infusions too.

Investors fear that the government will be unable to afford to rescue its banks, forcing the country to apply for help from the 500 billion euros European bailout fund and the IMF.

Meanwhile, Spain's deputy prime minister Saenz de Santamaria headed to Washington to discuss the economic crisis with the U.S. Treasury Secretary Tim Geithner and IMF boss Christine Lagarde.

Lagarde has denied reports that the IMF was drawing up plans for a rescue loan for Spain. "There is no such plan," she said.

In Brussels, European Central Bank head Mario Draghi criticized the Spanish government for failing to get to grips with the problems in its banking sector.

"There is a first assessment, then a second, a third, a fourth," Draghi said in the European Parliament. "This is the worst possible way of doing things. Everyone ends up doing the right thing, but at the highest cost."

In a further blow for Spain, Fitch ratings agency Thursday downgraded the creditworthiness of eight Spanish regions. Like the country's banks, Spain's autonomous regional governments are burdened by heavy debts.

Spain's central bank released igures that show investor money is rushing out of the country: a record 66.2 billion euros in March alone, double the figure for December.

Source: Europe News.Net